Leased Employee Credited Service

[Guest Chaffee]

Plan specifically excludes Leased Employees from participating in Plan. Assume that plan has 5 year cliff vesting (elapsed time method).

Assume employee performs services for 2 years through leasing organization and then is hired by Plan Sponsor and works for 4 years. It is my understanding that all service (6 years) would be counted for vesting purposes (assuming employee generated a benefit in the 4 years when eligible).

However, what if the service was 9 months through the leasing organization and 4.5 years employed by the Plan Sponsor. Would the employee still be fully vested (even though employee never completed the required year to become a "leased employee" under 414(n))?

Assume leasing organization does not provide the minimum required safe harbor plan benefit.

[Ron Snyder]

Plan specifically excludes Leased Employees from participating in Plan.

This raises serious nondiscrimination issues for a small employer.

It is my understanding that all service (6 years) would be counted for vesting purposes (assuming employee generated a benefit in the 4 years when eligible).

Your understanding is correct. After 12 months of being employed as a leased employee, all service counted retroactively.

However, what if the service was 9 months through the leasing organization and 4.5 years employed by the Plan Sponsor.

Then the employee would be credited with 4.5 years of service.

Assume leasing organization does not provide the minimum required safe harbor plan benefit.

The minimum safe harbor benefit is only relevant to whether there is discrimination as to plan benefits, not eligibility to participate.